Oil prices surged beyond $117 a barrel level on Monday in Asia, following an attack on a major pipeline in Nigeria by the end of the previous week.
This increase in the prices is also attributed to the comments by OPEC officials who said that OPEC is not likely to increase production.
Abdullah el al-Badri, secretary-general of OPEC reported on Sunday that oil prices would possibly increase and the group was prepared to raise production if the price pressure was related to supply shortages, which he doubted.
“Oil prices, there is a common understanding that has nothing to do with supply and demand” Al-Badri spoke to the press at energy conference in Rome.
There was an increase to $117.05 a barrel in light, sweet crude for May delivery in Asian electronic trading on the New York Mercantile Exchange early this Monday. The contract rose by 4 cents as it traded at $116.73 a barrel at midday in Singapore.
There was an attack on oil major Royal Dutch Shell PLC pipeline by the Movement for Emancipation of the Niger Delta, the main rebel group from south of Nigeria. This attack led to an increase of $1.83 to 116.9 a barrel in May crude on Friday.
The group also announced more attacks on the petroleum industry in Africa’s largest producer of crude oil.
Shell also confirmed a pipeline leak, last Friday. It reported that the leak had been caused by explosives. Shell further added that it had started repairs on the line and small amount of production had been closed.
Due to the attacks on Nigerian oil infrastructure since early 2006, by the rebel group, the country’s normal petroleum output has dropped by nearly one-quarter, up surging oil prices. Nigeria is one of the primary oil exporters to the U.S.
An array of supply and demand concerns in the U.S. and abroad and the declining dollar have played a role in supporting prices even when record retail gasoline prices in the U.S. have led to decreased demand. Crude prices have increased by almost 6 percent in the previous week.
Analysts consider the declining U.S. currency to be the main reason behind spiraling oil prices that have gone beyond $100 a barrel this year. A weakening dollar attracts investors into purchasing hard commodities like oil and gold as a hedge against inflation. Weak dollar has also made the commodities cheaper for buyers in international market with other currencies.